A year on, the two-pot retirement system is positively shifting South Africans' mindset around long-term savings

A year after the two-pot retirement system was implemented in South Africa, retirement-fund data shows that, contrary to the scepticism of some media reports, this system is set to vastly improve retirement outcomes for working South Africans. This is an opportune time for employers to support employees, particularly early-career employees, to make informed choices about their retirement benefits, empowering them to retire with confidence.

Guy Chennells, Chief Commercial Officer for Discovery Corporate and Employee Benefits, says that retirement funds were initially overwhelmed with savings-pot withdrawal requests in September 2024 and, to a lesser extent, at the beginning of the new tax year in March 2025. "Encouragingly, the majority of retirement fund members are choosing not to withdraw the contributions allotted to their savings pots, and even those who do withdraw funds, will be generally better off at retirement."

What the data shows

Chennells says an analysis of Discovery's employee benefits data shows that withdrawal claims were high in September last year, likening the episode to a "run on the banks". Half of all claims processed between September 2024 and June 2025 occurred in that first month. "However, by November 2024, claims had stabilised and, apart from a slight peak in March 2025, they have maintained a low, stable level month-on-month," he says.

The biggest surprise was that of the 89% of retirement fund members eligible to withdraw money from their savings pot, only 39% had done so by June 2025. "Amid soaring living costs and economic pressures, the majority of eligible South Africans - six in 10 - resisted the urge to dip into their savings pots and are choosing to preserve funds," Chennells says.

He says it is evident that the long-term impact of the government's two-pot retirement system will be profound - and every generation stands to benefit. Those who do withdraw funds will still be better off than under the previous system, which allowed employees full access to their savings upon changing jobs. "If we look at South Africa's overall retirement picture, we expect South Africans to double their retirement savings, on average. At current trends, we project that, over 40 years, South Africans will be three to four times wealthier in retirement because of this mandatory preservation," Chennells says.

Insights for young employees

Those who will benefit the most are recent entrants to the job market who do not have a "vested pot" - the portion of savings accumulated up until 31 August 2024, which is not subject to the rules of the two-pot retirement system. Their contributions, over the course of their careers, will be fully governed by the two-pot retirement system, split between accessible savings and preserved funds.

Discovery Corporate and Employee Benefits calculated the differences in outcomes between pre-two-pot and post-two-pot retirement scenarios. Using the percentage of an employee's final salary that their retirement savings will provide as a pension (the net replacement ratio or NRR), Chennells explains three scenarios:

"Let's take a hypothetical employee named John, aged 25 years, who plans to retire at 65. His targeted NRR is 80% of his salary as a pension. If he is diligent and never touches his retirement savings over his 40-year career, the 80% NRR he achieves will be the same under the current two-pot retirement system as it would have been under the old system."

"But let's look at what happens if John withdraws his available savings each time he changes jobs. Under the old system, where he could withdraw the entire amount on each resignation, he would end up with an NRR of just 4% of his salary as a pension at retirement. Under the current two-pot retirement system, John will have an NRR of 41%, which, although far from adequate, is still 10 times what he would have had before the mandatory preservation of funds," Chennells says.

"In the third scenario, we calculated John's NRR if he withdrew his savings pot under the current two-pot system each time he changed jobs, until the age of 45. After realising his lack of adequate retirement savings, he preserves everything in the fund thereafter for 20 years. In the pre-two-pot retirement savings scenario, he would have achieved an NRR of 21% of his salary as pension. Whereas under the current two-pot retirement system, John would be able to retire on 48% of his final salary - or about 2.3 times more than he would have had," he says.

Key takeaways for employers and employees

According to Chennells, this is an ideal time for employers to encourage employees to be protective of their retirement savings and actively nurture their financial futures.

A positive spin-off of the two-pot retirement system, the retirement industry has found*, is heightened engagement between retirement fund members and their funds. This engagement is increasingly occurring through digital interaction, with more funds and fund administrators providing apps for their members, not only to check on their fund balances, but to learn behaviours conducive to long-term financial health.

Members of the Discovery Retirement Fund can, if they bank with Discovery Bank, seamlessly track and manage their retirement fund portfolios in their app. They can view their balances and see exactly how much they have available to withdraw from their savings pot and how much is preserved for retirement. There are pointers on how the two-pot retirement system works, tips for fund members to optimise their savings, and a handy calculator to assess how withdrawals could impact their finances. Withdrawals are quick and easy in the app - members can submit requests in under 60 seconds and, following clearance from SARS, the money will be deposited into a linked Discovery Bank account within three business days.

"The fact that members' retirement fund portfolios, along with information on managing their savings, are accessible in an instant on their smartphones, can only be positive for boosting awareness around retirement savings and the importance of preservation. If members can see at a glance how much tax they'll pay on a withdrawal and what impact a withdrawal will have on their retirement lump sum, it is likely that an increasing number of them will take an active interest in preserving and growing their savings," Chennells says.

"Discovery's comprehensive suite of financial products, accessible on our banking app, gives employees the means to transact and invest quickly and seamlessly. They also get the support they need to make smart financial decisions, including those regarding their retirement savings."

*Retirement fund industry presentations at the Institute of Retirement Funds Africa Conference 2025.